IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v38y1986i0p184-202.html
   My bibliography  Save this article

Firm-Specific Information, Product Differentiation, and Industry Equilibrium

Author

Listed:
  • Perloff, Jeffrey M
  • Salop, Steven C

Abstract

Where consumers have imperfect i nformation about specific firms' prices and lack information about the market, f irms have informational market power. In general, improving the consumers' infor mation about each firm's price will not necessarily lower the average market pri ce. The authors show however that certain types ofimprovements will lower price. Moreover a reduction in barriers to entry (e.g., capital costs) will lower pri ce, holding information constant. Where a significant number (but not all), cons umers have perfect information, single-price equilibria are impossible. Copyright 1986 by Royal Economic Society.

Suggested Citation

  • Perloff, Jeffrey M & Salop, Steven C, 1986. "Firm-Specific Information, Product Differentiation, and Industry Equilibrium," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 184-202, Suppl. No.
    • Handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:184-202
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0030-7653%28198611%292%3A38%3C184%3AFIPDAI%3E2.0.CO%3B2-5&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stiglitz, J E, 1979. "Equilibrium in Product Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 69(2), pages 339-345, May.
    2. Stiglitz, Joseph E, 1975. "The Theory of "Screening," Education, and the Distribution of Income," American Economic Review, American Economic Association, vol. 65(3), pages 283-300, June.
    3. Louis L. Wilde & Alan Schwartz, 1979. "Equilibrium Comparison Shopping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 543-553.
    4. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    5. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 493-510.
    6. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
    7. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 511-518.
    8. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    9. Diamond, Peter & Rothschild, Michael (ed.), 1978. "Uncertainty in Economics," Elsevier Monographs, Elsevier, edition 1, number 9780122148507.
    10. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gladys López-Acevedo, 1997. "Quantal response equilibria for posted offer-markets," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 12(2), pages 95-131.
    2. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    3. Thomas A Abbott III, 1992. "Price Dispersion In U.S. Manufacturing: Implications For The Aggregation Of Products And Firms," Working Papers 92-3, Center for Economic Studies, U.S. Census Bureau.
    4. Raymundo M. Campos-Vázquez & Eduardo M. Medina-Cortina, 2019. "Pass-through and competition: the impact of soft drink taxes as seen through Mexican supermarkets," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-23, December.
    5. Dennis W. Carlton & Jeffrey M. Perloff, 1989. "The Economics of Information," Food Marketing Policy Center Research Reports 005, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    6. Ran Spiegler, 2006. "The Market for Quacks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 1113-1131.
    7. Wisnicki, Bartlomiej, 2022. "Consumer inertia fosters product quality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    8. Topolyan, Iryna, 2017. "Price competition when three are few and four are many," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 175-191.
    9. Zamani, Omid & Bittmann, Thomas & Loy, Jens-Peter, 2018. "Search costs and cost pass-through: Evidence for the Iranian poultry market," Economics Letters, Elsevier, vol. 171(C), pages 119-122.
    10. Muck, Johannes, 2016. "Tariff-mediated network effects with incompletely informed consumers," DICE Discussion Papers 210, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Kaukin, Andrey (Каукин, Андрей), 2018. "Diagnosis of the Growth Model of the Russian Air Transportation Market: Bottlenecks and Directions of Development [Диагностика Модели Роста Российского Рынка Авиаперевозок: Узкие Места И Направлени," Working Papers 061830, Russian Presidential Academy of National Economy and Public Administration.
    12. Thomas A Abbott Iii, 1989. "Price Dispersion in U.S. Manufacturing," Working Papers 89-7, Center for Economic Studies, U.S. Census Bureau.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlton, Dennis W. & Perloff, Jeffrey M., 1989. "The Economics of Information," Research Reports 25156, University of Connecticut, Food Marketing Policy Center.
    2. Joseph E. Stiglitz, 2017. "The Revolution of Information Economics: The Past and the Future," NBER Working Papers 23780, National Bureau of Economic Research, Inc.
    3. J. Barkley Rosser, 2003. "A Nobel Prize for Asymmetric Information: The economic contributions of George Akerlof, Michael Spence and Joseph Stiglitz," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 3-21.
    4. Mark Armstrong, 2015. "Search and Ripoff Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 273-302, November.
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, November.
    6. Clément Mazet-Sonilhac, 2021. "In search of frictions [Les frictions informationnelles dans les marchés du crédit et des biens]," SciencePo Working papers tel-03439354, HAL.
    7. Clément Mazet-Sonilhac, 2021. "In search of frictions [Les frictions informationnelles dans les marchés du crédit et des biens]," SciencePo Working papers Main tel-03439354, HAL.
    8. Burdett, Kenneth, 1989. "Search Market Models: A Survey," Working Paper Series 234, Research Institute of Industrial Economics.
    9. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    10. Lee, Wayne L & Thakor, Anjan V & Vora, Gautam, 1983. "Screening, Market Signalling, and Capital Structure Theory," Journal of Finance, American Finance Association, vol. 38(5), pages 1507-1518, December.
    11. Wioletta Dziuda & Giovanni Mastrobuoni, 2009. "The Euro Changeover and Its Effects on Price Transparency and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 101-129, February.
    12. Stiglitz, Joseph E., 2017. "Monopolistic competition, the Dixit–Stiglitz model, and economic analysis," Research in Economics, Elsevier, vol. 71(4), pages 798-802.
    13. Fishman, Arthur, 1992. "Search Technology, Staggered Price-Setting, and Price Dispersion," American Economic Review, American Economic Association, vol. 82(1), pages 287-298, March.
    14. Darby, Michael R. & Lott, John Jr., 1989. "Qualitative information, reputation, and monopolistic competition," International Review of Law and Economics, Elsevier, vol. 9(1), pages 87-103, June.
    15. Ewerhart, Christian & Li, Sheng, 2023. "Imposing Choice on the Uninformed: The Case of Dynamic Currency Conversion," Journal of Banking & Finance, Elsevier, vol. 154(C).
    16. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2022. "Occupational Regulation, Institutions, and Migrants’ Labor Market Outcomes," Labour Economics, Elsevier, vol. 79(C).
    17. Darcy W. E. Allen & Jason Potts & Julian Waters-Lynch & Max Parasol, 2024. "Costly Signalling in DAOs," Papers 2406.18457, arXiv.org.
    18. Samuli Leppälä, 2015. "Economic Analysis Of Knowledge: The History Of Thought And The Central Themes," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 263-286, April.
    19. Delfgaauw, Josse & Dur, Robert, 2007. "Signaling and screening of workers' motivation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 605-624, April.
    20. Roberto Rodríguez-Ibeas & U. Cantner, 2000. "A hybrid equilibrium in segmented markets: the three-firm case," Journal of Economics, Springer, vol. 72(1), pages 81-97, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:184-202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.